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ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting

A manager is told that a cost is uncontrollable at their level of management. Which statement is most accurate?

Controllability depends on the level of authority, so a cost that a junior manager cannot influence may be controlled by a more senior manager. It need not be fixed, should not be removed from the budget, and can usually be changed in the long term.

  1. AThe cost is uncontrollable at every level of the organisation and should never be reviewed
  2. BThe cost may be controllable by a more senior manager, so controllability depends on the level of authorityCorrect
  3. CThe cost must be fixed in nature
  4. DThe cost should be removed from the budget

Explanation

Controllability depends on authority and time horizon. A cost uncontrollable by a junior manager may be controlled by a more senior manager, and over the long term most costs become controllable. It need not be fixed or omitted from the budget.

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